But I would strongly argue that the failure of Sears is an example of free market success.
How is that a success of the free market? 2 old companies destroyed because someone got enough money to run them into the ground and make a killing doing it?
Are MLMs also a free market success story?
Their failures are free market successes, because the free market is all about vendors serving customers. Vendors that fail to do so, are expected to die. Sears grossly failed to do so, for a decade or two before being financially zeroed.
If there's any argument for market failure in the Sears case, it is that the death took soo long to be finalized.
The fewer the players on the market, the more likely collusion and monopolistic behaviors start to form.
But I also do not buy your premise that both companies were "dead companies lurching forward." Both companies had GOBS of assets that they could have liquidated and used to restructure into success. Those gobs of assets WERE liquidated but instead of being used to serve vendors or customers, they were used to enrich the shareholders.
The failure here is that this behavior of pillaging a company to it's detriment is something that could happen to any business. It wasn't done out of stupidity or ignorance, it was a malicious act of greed.
The problem I have with the free market hypothesis is it works only when there are many players on the market. However, entry into the market is by it's nature expensive and the economies of scale practically guarantee monopolistic end-states.
Consider, for example, the current state of the semiconductor industry. If Intel fails, would that be a free market success story? I would argue no because the market, particularly around fabrication, is already hugely concentrated into very few key players. We are not going to see a new cutting edge fab company (barring trust busting).
This consolidation action is happening up and down the market in everything from food to healthcare. We are actively seeing the death of small time farmers because of consolidation in meatpacking, groceries, and milling. Because a big mill doesn't want to deal with some 100acre farmer, they are actively locking them out of participation. And because a company like Nestle doesn't want to deal with 100 mills, smaller mills are being locked out of the market. These actions are all free market.
I call the death a Sears a failure in the market because it kills off competition. The only time it could be a market success story is if we had an actively competitive market with a large number of players.
Sears had one big problem when Eddie took over: it was out of step with the then-current retail format (big box stores). Its stores were heavily situated in enclosed malls that were out of fashion. The solution was straightforward if expensive: reformat the business (Sears had already done this twice before).
But then Eddie rolled into town with his genius consultants and a galaxy brained idea: Kmart has stand-alone stores that kinda look like big box if you squint. So let's just merge the brands together! Then Sears ends up in big boxes without expensive reformatting!
The fact that the brands were completely incompatible was pointed out by everyone who knew anything, but those weren't people in Eddie's inner circle so their opinions meant nothing.
By the way I don't think ESL Investments ended up making money on Sears. They stripped the company of assets yes, but most of those assets were distressed by the collapse of Sears. Like a lot of real estate was in struggling malls that had Sears as the anchor tenant. ISTR some of ESL's LPs suing Eddie.
Eddie made money the way all PE fund managers make money even when everyone else involved loses their shirt: by charging fees.
